Correlation Between Australian Strategic and Australian Unity
Can any of the company-specific risk be diversified away by investing in both Australian Strategic and Australian Unity at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Australian Strategic and Australian Unity into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Australian Strategic Materials and Australian Unity Office, you can compare the effects of market volatilities on Australian Strategic and Australian Unity and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Australian Strategic with a short position of Australian Unity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Australian Strategic and Australian Unity.
Diversification Opportunities for Australian Strategic and Australian Unity
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Australian and Australian is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Australian Strategic Materials and Australian Unity Office in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Australian Unity Office and Australian Strategic is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Australian Strategic Materials are associated (or correlated) with Australian Unity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Australian Unity Office has no effect on the direction of Australian Strategic i.e., Australian Strategic and Australian Unity go up and down completely randomly.
Pair Corralation between Australian Strategic and Australian Unity
Assuming the 90 days trading horizon Australian Strategic Materials is expected to under-perform the Australian Unity. In addition to that, Australian Strategic is 4.31 times more volatile than Australian Unity Office. It trades about -0.08 of its total potential returns per unit of risk. Australian Unity Office is currently generating about -0.07 per unit of volatility. If you would invest 113.00 in Australian Unity Office on September 27, 2024 and sell it today you would lose (5.00) from holding Australian Unity Office or give up 4.42% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Australian Strategic Materials vs. Australian Unity Office
Performance |
Timeline |
Australian Strategic |
Australian Unity Office |
Australian Strategic and Australian Unity Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Australian Strategic and Australian Unity
The main advantage of trading using opposite Australian Strategic and Australian Unity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Australian Strategic position performs unexpectedly, Australian Unity can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Australian Unity will offset losses from the drop in Australian Unity's long position.Australian Strategic vs. Northern Star Resources | Australian Strategic vs. Evolution Mining | Australian Strategic vs. Bluescope Steel | Australian Strategic vs. Aneka Tambang Tbk |
Australian Unity vs. Latitude Financial Services | Australian Unity vs. Spirit Telecom | Australian Unity vs. Australian Strategic Materials | Australian Unity vs. EP Financial Group |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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